2018 (5) TMI 1946 - AT - Income Tax

Revenue's Appeal Dismissed by Tribunal for Assessment Year 2013-14

Dy. Commissioner of Income Tax, Circle 1 (1) (1), Bangalore Versus M/s. Axiscades Aerospace & Technologies Pvt. Ltd.

The revenue's appeal against the order of the Ld. Commissioner of Income Tax (Appeals) for Assessment Year 2013-14 was dismissed by the Tribunal on May ... Disallowance u/s 14A - absence of exempt income - HELD THAT:- Now it is settled proposition of law that the provisions of Section 14A cannot be invoked in the absence of exempt income. Reliance in this regard can be placed on the decision of Special Bench of ITAT, Hyderabad in the case of ACIT Vs. Progressive Constructions Ltd. [2017 (3) TMI 1167 - ITAT HYDERABAD] . The decision of the learned CIT (Appeals) is in consonance with the ratio laid down in the Special Bench (supra). Therefore, we do not find any reason to interfere with the impugned order of the learned CIT (Appeals). Hence the grounds raised by the revenue are dismissed. Issues:Appeal against order of Ld. Commissioner of Income Tax (Appeals)-1 for Assessment Year 2013-14. Grounds raised by revenue: (1) Order of Ld. CIT (Appeals) prejudicial to revenue's interest, (2) Disallowance made u/s 14A r.w. Rule 8D, (3) Request to reverse Ld. CIT (A) order.Analysis:The respondent-assessee, a company engaged in system integration activities, filed its income tax return for Assessment Year 2013-14 declaring income of Rs. 3,77,06,881. The Assessing Officer completed assessment under Section 143(3) of the Income Tax Act, 1961, determining total income at Rs. 6,59,87,925 and made an addition of Rs. 2,82,81,044 invoking Section 14A of the Act. The assessee contended that no exempt or dividend income was received, hence Section 14A cannot be applied. The Assessing Officer relied on CBDT Circular No.5 of 2014, but the Ld. CIT (Appeals) deleted the addition as no exempt income was received during the year. The revenue appealed against this decision.The Tribunal noted that Section 14A cannot be invoked in the absence of exempt income, citing the decision of ITAT Special Bench in ACIT Vs. Progressive Constructions Ltd. The Ld. CIT (Appeals) decision was found to be in line with this precedent, leading to the dismissal of the revenue's appeal. The Tribunal upheld the Ld. CIT (Appeals) order, emphasizing that without exempt income, Section 14A disallowance is not applicable. As a result, the appeal of the revenue was dismissed on May 31, 2018.